Manufacturers Struggle With Adoption Of Digital Supply Networks

Many manufacturers are moving beyond traditional linear supply chains and are using new technologies to create digital supply networks that can driver greater efficiency and agility in production and distribution. Yet while there are great benefits to digital supply chains, many manufacturers have challenges harnessing data and putting it in practice.

A new study by Deloitte and the Manufactures Alliance for Productivity and Innovation (MAPI) indicate there’s a big disconnect between executive expectations around digital supply networks and actual implementation. Roughly half of respondents believe their digital supply networks are “above average” compared to their competitors, but little more than a quarter have started implementing DSN solutions.

Researchers said the findings suggest companies are slow to adopt DSNs because they are unsure which technology will provide the most significant­­ value, or why to make the digital shift.

“While enthusiasm is high and manufacturers realize the benefits of Digital Supply Networks, many companies struggle to identify the right technology,” said Stephen Laaper, principal, Deloitte Consulting, LLP. “As a result, many hold off with key aspects of their transformation, which in turn puts their transformation at too slow a pace to avoid disruption.”

“Companies that wait too long or remain too conservative may ultimately resort to initiatives that are too large and too complex.”

While few executives believed implementation would lead to a “game-changing positive impact,” they do see significant advantages over traditional supply chains. Half said a primary reason of adoption is the ability to dramatically reduced the time it takes to make strategic decisions. Others said DSNs could increase sales efficiency, reduce operating costs or improve pricing or margins.

Nevertheless, there are still many key challenges remaining for manufactures, and the changing nature of work in advanced manufacturing technology may also impact DSN rollouts. While end-to-end transparency was the stated primary goal for many manufacturers, only six percent said they were in an ecosystem in which every member of the ecosystem could see each other’s data. Thirty percent of respondents said finding and training employees was another major challenge to implementation while four in ten said overcoming resistance to change was also an issue. Others stated concerns about cyber risk is the reason they are reluctant to provide production data to outside suppliers.

“All companies operate differently, thus their DSN implementations carry unique challenges based on the existing infrastructure, talent base, culture and technological requirements,” said John Miller, council director of MAPI.

Deloitte and MAPI suggested those seeking digital transformation should define their strategic vision and determine how they can execute small initiatives without working out all the details. They recommend companies adopt a “Digital Foundry” approach where ideas that have breakthrough potential in terms of business impact and generated and screened before being prototypes and piloted. This can enable manufacturers to reduce barriers to DSN implementation and manage risk exposure by validating ideas using defined steps in a controlled environment. Companies that wait too long or remain too conservative may ultimately resort to initiatives that are too large and too complex, Miller said.

“In the end, these companies risk being late to the game and implementing solutions whose value is hard to measure because of either the time it takes to show an improvement or the overall scale of the implementation,” Miller said.

Craig Guillot is a business writer based in New Orleans, La. His work has appeared in Wall Street Journal, Entrepreneur, CNNMoney.com and CNBC.com. You can read more about his work at www.craigdguillot.com.

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